Dow up 37 points as some see stocks poised for rally

WALL STREET

October 13, 1992|By Bloomberg Business News

NEW YORK -- Stocks largely recouped Friday's losses yesterday amid signs that a rally might be on the horizon.

The Dow Jones industrial average surged 37.83, to 3,174.41. The Dow regained most of the 39 points it lost Friday, when the average finished at its lowest level of the year. About 21 points of yesterday's advance reflected computer-driven buy orders, Birinyi Associates said.

"It's an oversold rally from Friday," said John Blair, head equity trader at County NatWest. "People were overly eager to sell" because of jitters about Sunday's presidential debate, among other concerns.

Restrained by the Columbus Day holiday, trading reached its slowest pace since the Friday before the Sept. 7 Labor Day holiday. Only about 127 million shares changed hands on the Big Board. The government bond market was closed in observance of Columbus Day.

Last week, the Dow industrials lost 64 points amid disappointment that the Federal Reserve did not move to cut rates at the meeting of its policy-making arm. To make matters worse, a Financial Times report quoted a senior Fed official as saying that no rates would be cut before the Nov. 3 election.

But relief came over the weekend in the form of a rebuttal from Alan Greenspan, the Fed chairman. Mr. Greenspan said the Fed would not refrain from taking action just because of the election. "Clearly, we can adjust policy fairly rapidly if need be," he said.

"That certainly helped sentiment," said Thomas Gallagher, managing director in charge of capital commitment at Oppenheimer & Co. "Third-quarter earnings and interest rates have been the principal concerns, and we're getting through that period."

With sentiment this bearish, reflected in the high level of short interest in stocks, sentiment is probably close to turning, traders said.

Barton Biggs, Morgan Stanley's investment strategist, told the firm's sales force that he thinks the stage is being set for a major rally in the stock market. The market, Mr. Biggs said, became "very oversold" as sentiment turned bearish in recent weeks.

At Friday's low, the Dow was down 8 percent from its all-time closing high of 3,413.21, set June 1.

"Wall Street has shaken off a lot of the bad news over the past few weeks," Mr. Gallagher said. "It's conceivable there might be a rally into Election Day."

Gov. Bill Clinton's performance at Sunday night's presidential debate has made investors more comfortable with the idea of his becoming president, traders said.

Advancers led decliners by a margin of 9 to 4 among common stocks on the New York Stock Exchange. Standard & Poor's 500 rose 4.78, to 407.44; the NASDAQ Composite climbed 3.32, to 573.84.

Intel, perched near its three-month high of 66 5/8 before yesterday, drooped 5/8 , to 65 7/8 , as the company's record third-quarter earnings provided investors with the occasion to cash in their gains.

Merck climbed 5/8 , to 41 3/4 , after Roger Engemann, a leading money manager, recommended the stock Friday on the public television program "Wall Street Week with Louis Rukeyser."